Issues in SACCOS Development in Kenya and Tanzania: The Historical and Development Perspectives

Abstract

SACCOS (Savings and Credit Co-operative Societies) as of now are predominant form of external financing for small and micro enterprises in most of the developing counties (Kenya and Tanzania inclusive). Contemporary studies show that SACCOS’ role towards developing these small enterprises is increasing rapidly.From this insight, this paper discusses the origin, characteristics and contribution of SACCOS to the economic development. Considering their contributions; this paper also unveils the constraints to SACCOS’ development in these countries. In Kenya, SACCOS have been noted to contribute over 45% GDP, and it is estimated that at least one out of every two Kenyans directly or indirectly derives his /her livelihood from these kinds of cooperative movements. On the other hand, in Tanzania cooperatives (including SACCOS) through financing of SMEs contributes about 40% to the country’s GDP and employs 94.7% of school leavers every year, majority of these SMEs in rural areas depends on co-operative movements for external financing. The rapid development of SACCOS in both countries has been caused by growth of the private sector; which hugely demands external financial resources.  SACCOS in the two countries have more or less similar constraints including: lack of well-trained officials and proper administrative framework, bureaucracy, inability to raise vast financial resources and many others. This paper recommends policy makers and governments to come-up with policies and strategies that will support the growth of SACCOS which looks to be a pertinent alternative solution for financing micro and small businesses.

Key words:  SACCOS’ development, Kenya, Tanzania